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Indian ATM independents battered by losses following demonetization

Jan. 6, 2017

Nonbank ATM operators in India are weighing the idea of asking the government for compensation of losses incurred by its surprise demonetization — two months ago now — of 500 rupee and 1,000 rupee notes.

A report by India Times stated independent deployers have lost out on tens of millions of rupees in ATM fees due to a severe cash shortage caused by the withdrawal of India's two most widely used banknotes. Approximately 60 percent of India's independents operate on a fee-supported model.

The operators have complained that financial institutions — under whose sponsorship Indian IADs are required to operate — are hoarding cash received from the state bank for use in their own ATMs.

An executive from FSS, a provider of transaction processing and ATM service, told the Times that losses for the month of November alone could run to $74 million.

Indians, who pay for 90 percent of everything in cash, are none too happy with the nation's banks, either, according to an Economic Times report. Due to limits on cash withdrawal amounts, bank customers are having to make more trips to the ATM. Beyond five withdrawals per month, banks are allowed to charge a fee for each transaction.

In November, the government directed banks to suspend the collection of user fees until Dec. 31, by which date the cash situation was expected to return to normal. Now that this date has passed, banks have reinstated ATM fees — despite the fact that caps on withdrawals remain in place.